Editing Incentive (section)

==Divisions==
An incentive is a powerful tool to influence certain desired behaviors or action often adopted by governments and businesses.<ref>{{Cite journal |last1=Clark |first1=Peter B. |last2=Wilson |first2=James Q. |date=1961 |title=Incentive Systems: A Theory of Organizations |url=https://www.jstor.org/stable/2390752 |journal=Administrative Science Quarterly |volume=6 |issue=2 |pages=129–166 |doi=10.2307/2390752 |jstor=2390752 |issn=0001-8392|url-access=subscription }}</ref> 
Incentives can be broadly broken down into two categories: intrinsic incentives and extrinsic incentives.<ref>{{cite web |last1=Masterclass |title=Understanding Incentives in Economics: 5 Common Types of Economic Incentives |url=https://www.masterclass.com/articles/understanding-incentives-in-economics |website=Masterclass |access-date=2022-04-29}}</ref> Overall, both types of incentives can be powerful tools often employ to increase effort and higher performance according to the "law of behavior."

Incentives are most studied in the area of [[personnel economics]] where economic analysts, such as those who take part in human resources management practices, focus on how firms make employees more motivated, through pay and career concerns, [[Financial compensation|compensation]] and performance evaluation, to motivate employees and best achieve the firms' desired performance outcomes.<ref name=":4">{{Cite journal |last1=Lazear |first1=Edward. P |last2=Shaw |first2=Kathryn. L |date=2007 |title=Personnel Economics: The Economist's View of Human Resources |url=http://www.nber.org/papers/w13653.pdf |journal=Journal of Economic Perspectives |volume=21 |issue=4 |pages=91–114 |doi=10.1257/jep.21.4.91}}</ref>

=== Intrinsic and extrinsic incentive ===
An intrinsic incentive is when a person is motivated to act in a certain way for their own personal satisfaction without seeking any external reward, nor facing any external pressure to perform the task.<ref name="auto4">{{cite web |last1=Li |first1=Pamela |date=19 April 2019 |title=What is Intrinsic Motivation & How Does it Work? |url=https://www.parentingforbrain.com/intrinsic-motivation/ |access-date=2022-04-29 |website=Parenting for Brain}}</ref> For instance, a singer who enjoys singing may be intrinsically motivated to spend several hours a day to improve their performance without receiving any recognition or awards from others.<ref>{{cite book |last1=Benati |first1=Igor |chapter=Rewards in Bureaucracy and Politics |date=2018 |title=Global Encyclopedia of Public Administration, Public Policy, and Governance |pages=1–6 |editor-last=Farazmand |editor-first=Ali |place=Cham |publisher=Springer International Publishing |language=en |doi=10.1007/978-3-319-31816-5_3417-1 |isbn=978-3-319-31816-5 |last2=Coccia |first2=Mario|s2cid=158421245 }}</ref> Often, intrinsic incentives are useful in increasing one's empowerment, utility level, and autonomy and can reinforce employees’ work involvement and commitment.<ref>{{Cite journal |last1=O'Reilly |first1=C. A. |last2=Chatman |first2=J. |last3=Caldwell |first3=D. F. |date=September 1991 |title=People and Organizational Culture: A Profile Comparison Approach to Assessing Person-Organization Fit |journal=Academy of Management Journal |language=en |volume=34 |issue=3 |pages=487–516 |issn=0001-4273 |jstor=256404 |s2cid=45619898}}</ref>

Intrinsic incentives and extrinsic incentives are both important in driving people's behavior. Experts believe that intrinsic incentives are stronger motivators compared to extrinsic incentives as they increase employees’ work engagement and genuine enjoyment of work.<ref>{{Cite book |last1=Waqas |first1=Zafarullah |last2=Saleem |first2=Sharjeel |url=http://worldcat.org/oclc/1358510932 |title=The Effect of Monetary and Non-Monetary Rewards on Employee Engagement and Firm Performance |date=2014-11-01 |publisher=The International Institute for Science, Technology and Education (IISTE) |oclc=1358510932}}</ref> However, people's intrinsic motivation tends to decrease when they are offered too many extrinsic rewards. In order to maintain the action, constant incentives have to be provided. This is known as the [[overjustification effect|Overjustification Effect]].

While both types of incentive are a fundamental concept in economics that play a crucial role in motivating behavior, the extent to which and how they influence individual may depend on varies factors. Factors to consider may include the type of activity being incentivized, the individual's personal values and goals, and the context in which the incentive is offered. A well-designed incentive system should take into account to avoid unintended consequences and ensure that they align with the desired outcomes.

There are some parties who oppose the benefits of using extrinsic incentives and believe that they cause more harm than good. These opponents believe that the constant use of extrinsic incentives can lead to the crowding out of intrinsic incentives, which are also valuable performance motivators.<ref name="auto3" /> When people are constantly being incentivized by external pressures, they neglect their intrinsic motives which could consequently be detrimental to their work ethic.<ref name="auto2">{{cite web |last1=Behavioral Science Solutions |title=Incentives |url=https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/incentives/ |website=Behavioral Economics |access-date=2022-04-29}}</ref> Employees can become too comfortable with consistently gaining some reward for acting in a manner which is consistent with the interests of the firm. As a result, employees begin to believe that they deserve to earn rewards for doing certain things, not for the benefit of the firm but rather for their own benefit, which leads to them shirking if no extrinsic incentive is offered in return for high effort.<ref name="auto2" />

Nonetheless, incentives (both intrinsic and extrinsic) can be beneficial in altering a person's behavior and can be effectively used and executed within many different areas of life including in the workforce, in education and within one's personal life.<ref name="auto1" />